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Opalesque Exclusive: How Greenwoods Golden China Fund benefited from market rout, continues expansion Golden China Fund, managed by HK based Greenwoods Asset Management, gained 7.1% net of fees in August 2007, compared with 7.3% gain in both the MSCI China Free Index & the H-share Index, and 1.4% loss in the Shanghai B-share Index.

Greenwoods said "August isn’t the highest monthly return of the fund in 2007 but it is certainly the month that we, as manager of the fund, take the most pride in. Market’s roller-coaster movement in August is unfortunately a tax to managers who have enjoyed a great run up to July this year. It’s probably a much needed event to test managers’ conviction on their holdings and wisdom on risk management.

Greenwoods explained that they anticipated the market would "fall apart" and how they positioned themselves: "In our July newsletter published in mid August when the market was falling apart, we expressed our view about the market as “short-term liquidity crunch often provides great buying opportunities since indiscriminative selling creates mispricing in the market. The key is to know what to buy when opportunity presents itself.”

We executed the plan exactly as we said. At the morning meeting on Aug. 16, we prepared a list of ten stocks that we liked the most based on our growth and valuation matrix. We then called several brokers and wrote six-month, 90% puts against those stocks as we believed this is the best way to take ad......................

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